Baviera V Paglinawan

05. Baviera v.
Paglinawan
G.R. No. 168380, February 8, 2007
FACTS:
- Manuel Baviera, petitioner in these cases, was the former head of the HR Service Delivery and Industrial
Relations of Standard Chartered Bank-Philippines (SCB), one of herein respondents. SCB is a foreign banking
corporation duly licensed to engage in banking, trust, and other fiduciary business in the Philippines.
- Apparently, SCB did not comply with the above conditions provided by Resolution No. 1142 of the Monetary
Board of BSP. Instead, as early as 1996, it acted as a stock broker, soliciting from local residents foreign
securities called GLOBAL THIRD PARTY MUTUAL FUNDS (GTPMF), denominated in US dollars.
- These securities were not registered with the Securities and Exchange Commission (SEC). These were then
remitted outwardly to SCB-Hong Kong and SCB-Singapore.
- Investment Capital Association of the Philippines (ICAP) filed with the SEC a complaint alleging that SCB
violated the Revised Securities Act, particularly the provision prohibiting the selling of securities without prior
registration with the SEC; and that its actions are potentially damaging to the local mutual fund industry.
- In its answer, SCB denied offering and selling securities, contending that it has been performing a purely
informational function without solicitations for any of its investment outlets abroad; that it has a trust license
and the services it renders under the Custodianship Agreement for offshore investments are authorized by
Section 72 of the General Banking Act; that its clients were the ones who took the initiative to invest in
securities; and it has been acting merely as an agent or passive order taker for them.
- SEC issued a Cease and Desist Order against SCB, holding that its services violated Sections 4(a)and 19[8] of
the Revised Securities Act.
- the SEC informed the Secretary of Finance that it withdrew GTPMF securities from the market and that it will
not sell the same without the necessary clearances from the regulatory authorities.
- BSP directed SCB not to include investments in global mutual funds issued abroad in its trust investments
portfolio without prior registration with the SEC.
- SCB sent a letter to the BSP confirming that it will withdraw third-party fund products which could be directly
purchased by investors.
- However, notwithstanding its commitment and the BSP directive, SCB continued to offer and sell GTPMF
securities in this country.
- This prompted petitioner to enter into an Investment Trust Agreement with SCB wherein he purchased
US$8,000.00 worth of securities upon the banks promise of 40% return on his investment and a guarantee that
his money is safe.
- After six (6) months, however, petitioner learned that the value of his investment went down to US$7,000.00.
He tried to withdraw his investment but was persuaded by Antonette de los Reyes of SCB to hold on to it for
another six (6) months in view of the possibility that the market would pick up.
- Meanwhile, the BSP found that SCB failed to comply with its directive of August 17, 1998. Consequently, it
was fined in the amount of P30,000.00.
- The trend in the securities market, however, was bearish and the worth of petitioners investment went down
further to only US$3,000.00.
- On October 26, 2001, petitioner learned from Marivel Gonzales, head of the SCB Legal and Compliance
Department, that the latter had been prohibited by the BSP to sell GPTMF securities.
PROCEDURE:
- Petitioner then filed with the BSP a letter-complaint demanding compensation for his lost investment. But
SCB denied his demand on the ground that his investment is regular.
- Petitioner filed with the DOJ, represented herein by its prosecutors, public respondents, a complaint charging
the above-named officers and members of the SCB Board of Directors and other SCB officials, private
respondents, with syndicated estafa.
- For their part, private respondents filed the following as counter-charges against petitioner: (1) blackmail and
extortion and blackmail and perjury.
- Petitioner also filed a complaint for perjury against private respondents Paul Simon Morris and Marivel
Gonzales.
- SEC : issued a Cease and Desist Order against SCB restraining it from further offering, soliciting, or otherwise
selling its securities to the public until these have been registered with the SEC.
- Subsequently, the SEC and SCB reached an amicable settlement.
- SEC then lifted its Cease and Desist Order and approved the P7 million settlement offered by SCB. Thereupon,
SCB made a commitment not to offer or sell securities without prior compliance with the requirements of the
SEC.
- Petitioner filed with the DOJ a complaint for violation of Section 8.1 of the Securities Regulation Code against
private respondents.
- DOJ: rendered its Joint Resolution dismissing petitioners complaint for syndicated estafa; private respondents
complaint for blackmail and extortion; private respondents complaint for blackmail and perjury; and
petitioners complaint for perjury against private respondents Morris and Gonzales.
- Meanwhile, in a Resolution, the DOJ dismissed petitioners complaint in (violation of Securities Regulation
Code), holding that it should have been filed with the SEC.
- Petitioners motions to dismiss his complaints were denied by the DOJ.
- Thus, he filed with the Court of Appeals a petition for certiorari.
- He alleged that the DOJ acted with grave abuse of discretion amounting to lack or excess of jurisdiction in
dismissing his complaint for syndicated estafa.
- He also filed with the Court of Appeals a separate petition for certiorari assailing the DOJ Resolution dismissing
the case for violation of the Securities Regulation Code.
- . Petitioner claimed that the DOJ acted with grave abuse of discretion tantamount to lack or excess of
jurisdiction in holding that the complaint should have been filed with the SEC.
- CA: dismissed the petition. It sustained the ruling of the DOJ that the case should have been filed initially with
the SEC.
ISSUE/S: W/N the Court of Appeals erred in concluding that the DOJ did not commit grave abuse of discretion in
dismissing petitioners complaint for violation of Securities Regulation Code and his complaint for syndicated estafa.
RULING:
For violation of the Securities Regulation Code ( NO)

- The Court of Appeals held that under the above provision, a criminal complaint for violation of any law or rule
administered by the SEC must first be filed with the latter. If the Commission finds that there is probable cause,
then it should refer the case to the DOJ.
- Since petitioner failed to comply with the foregoing procedural requirement, the DOJ did not gravely abuse its
discretion in dismissing his complaint.
- A criminal charge for violation of the Securities Regulation Code is a specialized dispute.
- Hence, it must first be referred to an administrative agency of special competence, i.e., the SEC.
- Under the doctrine of primary jurisdiction, courts will not determine a controversy involving a question within
the jurisdiction of the administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the specialized knowledge and expertise of said administrative tribunal to
determine technical and intricate matters of fact.
- The Securities Regulation Code is a special law. Its enforcement is particularly vested in the SEC.
- Hence, all complaints for any violation of the Code and its implementing rules and regulations should be filed
with the SEC. Where the complaint is criminal in nature, the SEC shall indorse the complaint to the DOJ for
preliminary investigation and prosecution as provided in Section 53.1 earlier quoted.
For Syndicated Estafa (NO)

- Section 5, Rule 110 of the 2000 Rules of Criminal Procedure, as amended, provides that all criminal actions,
commenced by either a complaint or an information, shall be prosecuted under the direction and control of a
public prosecutor.
- This mandate is founded on the theory that a crime is a breach of the security and peace of the people at large,
an outrage against the very sovereignty of the State. It follows that a representative of the State shall direct and
control the prosecution of the offense. This representative of the State is the public prosecutor.
- Concomitant with his authority and power to control the prosecution of criminal offenses, the public
prosecutor is vested with the discretionary power to determine whether a prima facie case exists or not.
- This is done through a preliminary investigation designed to secure the respondent from hasty, malicious and
oppressive prosecution. A preliminary investigation is essentially an inquiry to determine whether (a) a crime
has been committed; and (b) whether there is probable cause that the accused is guilty thereof.
- Given this latitude and authority granted by law to the investigating prosecutor, the rule in this jurisdiction is
that courts will not interfere with the conduct of preliminary investigations or reinvestigations or in the
determination of what constitutes sufficient probable cause for the filing of the corresponding information
against an offender.
- Courts are not empowered to substitute their own judgment for that of the executive branch.
- In determining whether the DOJ committed grave abuse of discretion, it is expedient to know if the findings
of fact of herein public prosecutors were reached in an arbitrary or despotic manner.
- The Court of Appeals held that petitioners evidence is insufficient to establish probable cause for syndicated
estafa. There is no showing from the record that private respondents herein did induce petitioner by false
representations to invest in the GTPMF securities. Nor did they act as a syndicate to misappropriate his money
for their own benefit.
- Rather, they invested it in accordance with his written instructions. That he lost his investment is not their
fault since it was highly speculative.
- Records show that public respondents examined petitioners evidence with care, well aware of their duty to
prevent material damage to his constitutional right to liberty and fair play.
- In Suarez previously cited, this Court made it clear that a public prosecutors duty is two-fold. On one hand, he
is bound by his oath of office to prosecute persons where the complainants evidence is ample and sufficient to
show prima facie guilt of a crime. Yet, on the other hand, he is likewise duty-bound to protect innocent persons
from groundless, false, or malicious prosecution
FALLO
WHEREFORE, we DENY the petitions and AFFIRM the assailed Decisions of the Court of Appeals in CA-G.R. SP No. 87328
and in CA-G.R. SP No. 85078. Costs against petitioner. SO ORDERED

Baviera V Paglinawan

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05. Baviera v.

For violation of the Securities Regulation Code ( NO)

For Syndicated Estafa (NO)

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